In a significant stride towards advancing President Biden’s “Investing in America” initiative, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) have jointly released proposed rules and FAQs concerning key provisions within the Inflation Reduction Act. This guidance, which marks the completion of Phase 1 of the Treasury Department’s implementation of the Inflation Reduction Act, aims to ensure that the clean energy job sector offers well-compensated positions and to foster a diverse and skilled workforce ready to embrace the opportunities arising from the Act’s investments.
Key Highlights from the Guidance:
- Elevated Clean Energy Jobs: The prevailing wage and registered apprenticeship requirements, mandated by the Inflation Reduction Act, are set to impact various clean energy deployment tax incentives. These incentives encompass clean energy investment and production tax credits, playing a pivotal role in financing major utility-scale wind, solar, battery storage projects, as well as credits for carbon capture, utilization, and storage, and clean hydrogen projects. By fulfilling these requirements, taxpayers can lay claim to an augmented credit or deduction, potentially reaching up to five times the value of the standard credit or deduction.
- Extended Application: Notably, the Inflation Reduction Act extends the scope of prevailing wage and apprenticeship prerequisites, historically linked with federal contract-supported projects, to the realm of clean energy tax incentives for the first time. These requirements have been operational since January 29, 2023, facilitated by initial guidance from the Treasury and IRS. The proposed rules outlined in the Notice of Proposed Rulemaking (NPRM), released today, are set to provide stakeholders with enhanced clarity and direction on IRS guidelines, encouraging worker-centric practices, and streamlining compliance. Importantly, this guidance, developed in consultation with the U.S. Department of Labor, introduces new proposed rules that address rectifying failures to meet the prerequisites and substantiating compliance, thereby ensuring competitive wages for workers and promoting the expansion of the clean energy workforce.
- Facilitating Compliance: The proposed rules also introduce incentives for taxpayers to adopt qualifying Project Labor Agreements that adhere to specific criteria, thereby expanding the utilization of these agreements in the clean energy sector.
This comprehensive guidance signifies the culmination of the Treasury Department’s initial phase in implementing the Inflation Reduction Act’s clean energy provisions. The guidance not only underscores the Administration’s commitment to job creation and worker welfare but also contributes to meeting climate goals and reinforcing the nation’s energy future.
Treasury Secretary Janet L. Yellen underscored, “The Inflation Reduction Act is spurring historic investments in clean energy across the country, and today’s announcement will make sure we have skilled workers ready to take advantage of the jobs being created.” Acting Secretary of Labor Julie Su emphasized the policy’s potential to “increase apprenticeship in the clean energy economy” and guarantee fair wages. White House Senior Advisor for Clean Energy Innovation and Implementation John Podesta commended the alignment of clean energy economy growth with worker well-being.
The released guidance represents a crucial step towards aligning the clean energy sector with worker prosperity and underscores the government’s commitment to fostering a sustainable and thriving future.